Consumers Increasingly Linking Company Reputation, Product Brand - and Purchase Decisions

The fall out from the financial crisis continues to cloud customers' perceptions of business.

New research from Weber Shandwick states that as many as 70% of global consumers want to know who the product's corporate parent is and will make purchase decisions based on that company's reputation.

From ethics, to fair pricing, to customer service, to quality, to corporate social responsibility (or the lack thereof), consumers are making the link between what they buy and who produces it. There are companies that view this as an ominous development. But data have demonstrated for years now that in a post-industrial economy, particularly one in which consumers are being forced by economic circumstances to make unaccustomed choices, that values are as important a part of the purchase equation as is pricing.

Forward thinking companies are seizing the opportunity to strengthen their bond with their loyal base and build one with potential customers. From the consumer standpoint, the ability to exercise some power with companies eager to listen may be resulting in better choices more aligned with their needs and wants. As the economy becomes more global this sort of transparency may become an important underpinning for further growth in commerce and jobs. JL

Leslie Gaines-Ross comments in Harvard Business Review:

Every well trained manager knows about the "four P's" of marketing. To make a sale, a company must offer the right product to meet customers' needs, and at the right price. It has to be offered in a place they find convenient and, in order for them to know about it and how it can help them, it has to be promoted well.

New research by my colleagues and me, however, suggests that another "P" is growing in importance. Customers also care who the parent of the product is. Provided with plenty of comparable alternatives, and facing plenty of discretionary purchases, they'll choose to patronize the brand owned by the company they hold in higher esteem.
As one Chinese consumer we surveyed put it, "The company is like a parent to the product; and only good parents educate good kids."

This is a new phenomenon. As recently as a decade ago, a marketer could safely assume the institutional parentage of even a well-known brand was unknown—and of little interest—to the buying public. Marlboro was Marlboro and Camel was Camel. Who knew which came from Philip Morris and which from R.J. Reynolds? Pre-Internet days, if you asked your neighbors who was the company behind your favorite smoke, they'd scratch their heads or just assume the brand name was the company. They'd be just as unlikely to have opinions, positive or negative, on those parent corporations' reputations.

For all kinds of reasons, that has changed. People have become increasingly concerned with business's impact on the world, and search engines like Google or Bing make it trivially easy to find out who makes a product and how, where they operate, who they have offended, and what causes they have supported. Social media makes it easy to learn more, and spread the word. Suddenly, a brand's paternity is not only easy for customers to discover, it's important to them to consider. And they have no trouble boycotting products from companies that they believe fail to live up to their standards.

The research just conducted [pdf] by Weber Shandwick and KRC Research confirms this. When we surveyed consumers in four developed and emerging markets (U.S., U.K., China, and Brazil), no less than 70 percent of consumers claimed to have actively avoided a product because of its parent company. Almost as many, 67 percent, said they check product labels to determine the company behind the product before buying, and 61 percent become annoyed if they can't determine what company that is. Surprise about a product's parentage does not usually work to a brand's benefit. When consumers learn that a product or service they like is made by a company they do not like, surprised consumers are twice as likely to stop buying the product as they are to continue buying it.

Parent companies are learning fast how to manage their new consumer relevance. Aware that information about them can be a key stroke away, they are disclosing more in the name of transparency. For example, Altria, Philip Morris's parent (and grandparent of Marlboro), is front and center in educating consumers about the products that it sells, where it sells them, why it sells them, how it makes them, and what principles and causes it stands for.

As company reputation and product brand reputation become indivisible, we'll see more such disclosure. Brand promotions will seek to assure consumers that the company standing behind the brand is upstanding, ethical, and responsible. The kinds of information once communicated by investor relations and government affairs will be directed toward consumers. Market research will ask potential customers not only about the product features they value but about the corporate behaviors they admire.

Shoppers are seeing the choices they make in store aisles not only as votes of confidence in product quality but as votes of approval of corporate conduct. Just as in their charitable contributions, they want their money to support institutions known for integrity and for values they share. Appealing brand messaging will probably always catch their eye—but before making any serious commitments, they'll insist on meeting the parents.